Building a war chest: Acquisitions in the pipeline after OSIM’s $170m bonds issue

It could pounce on M&As in the near future.

Mainboard-listed lifestyle firm OSIM International took analysts by surprise with its $170m zero-coupon convertible bonds issue yesterday. Now, speculations abound as to how exactly OSIM is going to use the funds raised from this exercise.

The company’s official statement claims that proceeds will be used to enhance its well-being and lifestyle business in Asia and beyond, finance potential strategic acquisitions and for general working capital purposes.

However, a report from OCBC notes that OSIM already has a strong financial position, with a net cash balance of S$238.5m as at the end of June.

“Hence, this round of fund raising exercise comes as a surprise to us. We believe OSIM’s organic growth can be easily funded by its strong operating cashflow generating abilities. Hence, it is
likely that OSIM could be building a war chest for future acquisition opportunities,” noted OCBC.

A report by OSK DMG echoed this sentiment, noting that the issue will buff up OSIM’s cash position to around $450m by FY14.

“This puts the company in a very strong position to capitalise on M&A opportunities regardless of market conditions. Even assuming that OSIM spends the entire SGD450m, and treating the new CBs as loans, net gearing will still be a comfortable 30%,” noted the report.